U.S. Home Mortgage Lending Recovers in Q2

ATTOM released its Q2 2023 U.S. Residential Property Mortgage Origination Report, which shows that the total number of mortgages secured by residential property—approximately 1 to 4 units—in the U.S. increased to 1.56 million during Q2 of 2023. While that remained down 38% from a year earlier, it was up 21% from Q1 of 2023, representing the first such increase in two years.

The turnaround resulted from across-the-board quarterly increases of 13% to 29% in purchase, refinance, and home equity lending. Total activity rose after eight straight declines that had reduced lending by two-thirds—or nearly 68%. The increase was spurred in part by a resumption of the nation's 11-year housing market boom, which had stalled from the middle of last year into early 2023.

Overall lending remained down sharply during Q2 compared to highs reached in 2021, right before rock-bottom mortgage rates doubled and inflation spiked, spurring a rise in economic uncertainty nationwide. But even as interest rates ticked upward again during Q2 of this year, overall home-mortgage activity included a 29% quarterly jump in loans granted to home purchasers, to almost 794,000, and a 14% increase in refinance packages, to 477,000. Home equity lines of credit (HELOCs) also went up in Q2 of 2023 by 13%, to 285,000.

The report also found that overall, lenders issued $494 billion worth of residential mortgages in Q2 of 2023. That number remained down annually by 41%, but up quarterly by 23%.

While lending revived, the portion of all residential mortgages represented by different kinds of loans changed by smaller amounts. Purchase loans still comprised about half of all mortgages issued in Q2 of 2023, with refinance packages making up almost one-third and home-equity loans just under 20%. That remained far different from two years ago, when refinance deals made up two-thirds of all activity and purchase loans just one-third.

Home-mortgage rates were relatively stable, dipping back down in April toward 6% for a 30-year fixed-rate loan, before rising back up toward 7% by June. That followed a year when they had more than doubled from historically low levels under 3%.

"Homebuyers and owners alike lined back up again at the doors of mortgage lenders this Spring seeking loans of all kinds. It looks like owners took advantage of the small rate drop to refinance existing loans, while a jump in mortgages for purchasers was likely fueled by a number of forces that pushed the overall housing market to heat back up during the Spring buying season," said Rob Barber, CEO at ATTOM. "Buyers also might have jumped back in amid worries about even more rate increases that could have price them out of a new home."

Total lending activity increases quarterly in more than 95% of U.S.

Banks and other lenders issued a total of 1,555,469 residential mortgages in Q2 of 2023. That was up 20.8% from 1,287,442 in Q1 of 2023, although still down 37.6% from 2,493,790 in Q2 of 2022. The revival followed a two-year slump that had reduced total lending numbers to almost their lowest point this century. Despite the second-quarter turnaround, the latest total still was 63% less than the most recent high point of 4,171,212 hit in early 2021. That gap reflected eight consecutive quarterly decreases before the recent gain—the longest run of drop-offs this century.

A total of $494.3 billion was lent in Q2 of 2023, which was down 41.5% from $844.3 billion a year earlier, but up 23.5% from $400.3 billion in Q1 of 2023.

Overall lending activity remained down annually in all 197 metropolitan statistical areas around the U.S. with a population of 200,000 or more and at least 1,000 total residential mortgages issued in Q2 of 2023. However, it increased from Q1 to Q2 of 2023 in 192 (97%) of those metro areas. Total lending activity rose at least 15% quarterly in 167 of those areas (85%).

The largest quarterly increases were in:

1. Knoxville, TN (total lending +109.4% from Q1 of 2023 to Q2 of 2023)
2. Sioux Falls, SD (+49%)
3. Rochester, MN (+48.6%)
4. Des Moines, IA (+45.4%)
5. Manchester, NH (+44.4%)

Metro areas with a population of least 1 million that had the largest increases in total loans from Q1 to Q2 of 2023 were:

1. Milwaukee (+39.8%)
2. Chicago (+37.6%)
3. Boston (+32.1%)
4. Cleveland (+32.1%)
5. San Jose, CA (+31.7%)

The only metro areas with a population of at least 1 million where total lending went down during from Q1 of 2023 to Q2 of 2023 were Buffalo, NY (-39.2%) and St. Louis (-9.1%).

Refinance mortgage originations rise after hitting low point this century

Overall, lenders issued 477,219 residential refinance mortgages in Q2 of 2023. That was down 51.1% from 975,997 in Q2 of last year and remained 83% less than a peak of 2,743,700 reached in early 2021. But the latest figure was up 13.8% from the low point this century of 419,261 reached in the prior quarter. As with total lending, the number of refinance deals had dipped for eight straight quarters before turning back upward in the period running from April through June of this year.

The $141 billion dollar volume of refinance packages in Q2 of 2023 was still down 56.6% from $325 billion during the same period last year. But it was 7.9% above the $130.7 billion level in Q1 of 2023. Refinancing activity remained down the second quarter of last year to the same period this year in all but one of the 197 metro areas around the U.S. with enough data to analyze. But it was up quarterly in 178 (90%) of those metros.

The largest quarterly increases were in:

1. Knoxville, TN (refinance loans +87.4% from Q1 to Q2 of 2023)
2. Sioux Falls, SD (+47.2%)
3. Duluth, MN (+45.7%)
4. Manchester, NH (+45.2%)
5. Beaumont, TX (+41.7%)

Metro areas with a population of least 1 million where refinance activity increased most from Q1 to Q2 of 2023 were:

1. Kansas City, MO (+33.%)
2. Virginia Beach, VA (+24.3%)
3. Sacramento, CA (+23.7%)
4. Providence, RI (+22.5%)
5. Rochester, NY (+21.8%)

The only metro areas with a population of at least 1 million and a decline in number of refinance loans from Q1 to Q2 of 2023 were:

1. Buffalo, NY (-36.7%)
2. Honolulu (-33.8%)
3. St. Louis (-20.9%)
4. Louisville, KY (-15.2%)
5. Grand Rapids, MI (-1.4%)

Furthermore, refinance packages comprised 30.7% of all loan originations in Q2 of 2023, up from 32.6% in the prior quarter, but still down from 39.1% in Q2 of 2022 and far less than the 65.8% portion in Q1 of 2021.

Purchase mortgages soar almost 30%

Lenders originated 793,659 purchase mortgages in Q2 of 2023. That was down 31.8% from 1,164,284 a year earlier and 47.6% from a peak of 1,515,922 in Q2 of 2021. But the second-quarter number was up 28.8% from 616,206 in Q1 of 2023, following seven straight quarterly declines. The $302.4 billion dollar volume of purchase loans in Q2 of 2023 remained down 32.9% from $450.4 billion a year earlier, but was 35.9% more than the $222.5 billion figure in Q1 of this year.

The largest quarterly increases were in:

1. Knoxville, TN (purchase loans +116.8%)
2. Honolulu (+84.4%)
3. Madison, WI (+84.4%)
4. Ann Arbor, MI (+68.3%)
5. Utica, NY (+67.3%)

Aside from Honolulu, the biggest quarterly increases in metro areas with a population of at least 1 million in Q2 of 2023 were in:

1. San Jose, CA (+56.1%)
2. Boston (+55.7%)
3. Milwaukee (+55.3%)
4. Indianapolis (+50.8%)

The only decreases in purchase lending from Q1 of 2023 to Q2 of 2023 in metro areas with a population of at least 1 million were in Buffalo, NY (-30.9%) and St. Louis (-0.3%). Home-purchase loans comprised 51% of all loan originations in Q2 of 2023, up from 47.9% in the prior quarter, 46.7% in Q2 of 2022, and 29.% in early 2021.

HELOC lending rises after two straight declines

A total of 284,591 HELOCs were originated on residential properties in Q2 of 2023. While that figure was down 19.5% annually, it was up 12.9% from 251,975 in the prior quarter. The increase came after two consecutive quarterly declines. The $50.9 billion volume of HELOC loans in Q2 of 2023 remained down 26.2% year-over-year, but was up 8% from $47.1 billion in Q1 of 2023. HELOCs comprised 18.3% of all loans in the most recent quarter. That was down from 19.6% in the prior quarter, but still four times the level in the early part of 2021.

HELOC mortgage originations increased from Q1 of 2023 to Q2 of 2023 in 79% of the metro areas analyzed. The largest increases in metro areas with a population of at least 1 million were in:

1. Grand Rapids, MI (home-equity credit lines +48.9%)
2. Rochester, NY (+47.6%)
3. Milwaukee (+38.4%)
4. Birmingham, AL (+33.6%)
5. Minneapolis (+32.9%)

The largest quarterly decreases in HELOC activity in metro areas with a population of at least 1 million and sufficient data to analyze came in:

1. Buffalo, NY (-49.2%)
2. Austin, TX (-12.7%)
3. St. Louis (-10.8%)
4. San Antonio (-8.6%)
5. Washington (-6.5%)

FHA loan portions go up while VA lending holds steady

Mortgages backed by the Federal Housing Administration (FHA) rose as a portion of all lending for the seventh straight quarter. They accounted for 213,944 (13.8%) of all residential property loans originated in Q2 of 2023. That was up from 12.9% in Q1 of 2023 and 10.7% in Q2 of 2022.

Residential loans backed by the U.S. Department of Veterans Affairs (VA) totaled 84,917 (5.5%) of all residential property loans originated in Q2 of 2023. That was the same portion as in the previous quarter, although still up from 5.1% a year earlier.

Purchase loan and down-payment percentages increase

The second quarter of 2023 saw increases nationwide in both the median single-family home loan and the typical down payment percentage for home purchases in Q2 of 2023. Among homes purchased with financing in the second quarter of 2023, the median loan amount was $324,000. That was up 6.6% from $303,875 in the prior quarter, although still down annually by 2.3% from $331,500.

The median down payment of $31,500 on single-family homes and condos purchased with financing in the second quarter of 2023 was up 19.1 percent from $26,450 in the first quarter of 2023. With home prices rising in most of the country, the typical down payment also increased as a percentage of the median purchase price. It represented 8.3 percent of the median price in the second quarter of 2023, which was up from 7.6 percent in the prior quarter, although still down from 10.1 percent a year earlier.

"Lenders certainly aren't anywhere near as busy as they were back in 2021," said Barber. "And the second-quarter surge could be just a momentary thing. But the upturn was significant and a testimony to how strong the housing market remains around the country."

To read the full report, including more data, charts, and methodology, click here.